OFT firms off the hook as council abandons legal action

22 March 2010

Leeds City Council will now not take reprisals against contractors named in the Office of Fair Trading probe after lawyers advised that the evidence is too weak for action. Legal commentators say that what happened in Leeds is likely to be replicated by local authorities and public sector clients elsewhere, Building reported.

A source close to the situation said: “The evidence given by the OFT is not enough to exclude contractors or claim for compensation. The evidence we have wouldn’t stand up in court." An official announcement is expected from the council in the next few weeks.

Councils looking to pursue action against any of the 103 contractors on the list would have to prove that they had suffered a loss that was directly related to the cover pricing. They would also face difficulties in blacklisting contractors under EU procurement laws.

In January, Building revealed that Leeds had stepped up its investigation into 32 firms it uses that were named by the OFT. Letters were sent out seeking details of their involvement in bid rigging and it said it would look into excluding firms from future work, including the £1.2bn Yorbuild framework.

Lawyers said its decision would affect decisions by other councils such as North Yorkshire, which had also considered legal action.

Rupert Choat, a partner at CMS Cameron McKenna, said: “Other authorities in a similar position will face the same difficulties. It wouldn’t be surprising if they also reached the same view.”

The decision, which will come as a relief to firms who feared that the OFT’s fines would impact on their ability to win work, was welcomed by the industry. Julia Evans, chief executive of the National Federation of Builders, said: “The businesses ruled against by the OFT have paid their fines – there is no need to punish them any further. It is time to move on.”

One contractor named by the OFT, who wished to remain anonymous, said: “This is really good news. Leeds uses a lot of regional contractors, and in the current market, it would have been the final nail in the coffin for many.”

Another said: “Common sense has won the day.”

The OFT fined 103 firms a total of £129.5m for anti-competitive behaviour including cover pricing.

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